Editorial: Better corporate governance needed

After Premier Su Tseng-chang's (蘇貞昌) decision to sack the top management at Taiwan Fertilizer Co, attention focused on the long-running feud between the company's former chairman Fan Chen-tsung (范振宗) and former president Huang Ching-yen (黃清晏), as well as the alleged involvement of first lady Wu Shu-jen (吳淑珍) in the personnel reshuffle.

But few people have noticed that there's another concern which makes this personnel change seem even worse -- the lack of corporate governance.

In their struggle to grab control of the company, neither Fan nor Huang wanted to give an inch. Ever since their appointments in October 2003, policies they implemented ran counter to each other. They were primarily selected for the positions as a part of the Chen Shui-bian (陳水扁) government's efforts to use the company's massive resources for its political agenda.

But the most worrisome issue is the obvious lack, over the last three years, of accountable records kept by Council of Agriculture, Financial Supervisory Commission and Executive Yuan officials responsible for supervising the company's management team and ensuring shareholders' rights and interests.

Some people attributed this insufficient supervision to infighting between different political factions within the government. Others said it was due to the government's shrinking ownership in Taiwan Fertilizer after the government sold another 20 percent stake last year, reducing its holdings to 24 percent, with foreign investors owning about 47 percent.

Theoretically, Taiwan Fertilizer has been a private company since 1999. The reason that the Democratic Progressive Party (DPP) government could select both Fan and Huang to manage the company in 2003 was because the government still enjoyed a majority 44 percent stake at the time. In this respect, there's no difference between the DPP and its predecessor Chinese Nationalist Party (KMT): They both like to put their own people in posts at state-controlled companies in order to serve their own political will.

If appointed candidates prove their ability to guide state-controlled companies to prosperity, the government could better legitimize its political dominance. But the selection of those candidates ran counter to principles of good corporate governance, as they were widely criticized for their inexperience and lack of industry-specific backgrounds.

Consider the example of the Taiwan Sugar Corp, which has had four chairmen in the last five years. The company has continued to suffer losses and has only managed to cut its losses by selling its massive land holdings.

In the case of Taiwan Fertilizer, the Executive Yuan last week appointed Lee Ching-lung (李金龍) -- a former chairman of the Council of Agriculture and now a national policy adviser -- to act as both the firm's chairman and president, in a bid to prevent further damage to the company.

It might seem that Lee's horticultural background makes him an appropriate choice. But will the reshuffle at Taiwan Fertilizer lead to a personnel selection process that would allow the most suitable candidates to take the helm of state-controlled companies?

The government's relatively weak stakeholding in the company has become a potentially sensitive issue in view of the annual shareholders' meeting in October. Will the government implement better corporate governance to help the company seek appropriate external candidates to serve on the board, and thus safeguard the company's most valuable land assets?